The Influence of Saving Motives on Saving Habit; The Case of Bank Depositors in Addis Ababa City
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Date
2015-06
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Addis Ababa University
Abstract
To achieve either individual or societal long term financial plans, regular saving habit is of a
great importance. In modern society, money is usually saved in the form of Bank deposits.
These deposits achieved as a result of various saving motives of depositors, which in turn led
to saving habits. For instance, Banks give interest rate (motive) in order to make people to
prefer depositing regularly (habit).In this regard, there is much debate on whether interest
rate determines saving level as it can specially be seen currently in Ethiopia where saving is
growing regardless of negative real interest rate. Nevertheless, the main point is that apart
from interest rate benefit, which is a motive under control of Banks; depositors have many
saving motives, which accordingly affect their saving habit. The study identifies seven saving
motives (Bequest, Lifecycle, Independence, Precautionary, Buying Durable Goods, Profit
and Calculation) and investigated their influence on saving habit (regular, irregular and not
save). To do so, it was analyzed bank saving account depositors response collected using
self-administered questionnaires using multinomial logistic regression. This finally helped to
understand which saving motive regulates saving habit, and this could in turn enable to
design suitable strategies to promote better saving. In addition, the study investigated the
most important points depositors prefer to save in Banks, factors depositors look to prefer
one bank from the other. It was found out that Lifecycle and Precaution saving motives were
important predictors of regular saving. Gender, age, employment status, and having a child
showed association with specific saving motives. Marital status and educational level was
found out to be insignificant reasons to choose one saving motive from the other. Depositors
gave precedence to other saving motives which influenced them to save more at the expense
of low (and negative in real terms) interest rate. The improvement on saving knowledge
became the first reason that made depositors to increase their saving. The need for safety
was found out to be the principal reason to save in a bank. Swiftness of service, proximity of
the bank to home or office, and trust were the major criteria to prefer one bank from the
other. It was recommended that banks and similar institutions should promote specific goal
oriented saving and design financial strategies and products suitable for each saving
motives, which in turn could lead to regular saving.
Key words: Saving Habit, Saving Motive, Saving Account, Calculation Motive, Banks
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Keywords
Saving Habit, Saving Motive, Saving Account, Calculation Motive, Banks